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The Great Divergence: America's Growing Inequality Crisis and What We Can Do about It
For the past three decades, America has steadily become a nation of haves and have-nots. Our incomes are increasingly drastically unequal: the top 1% of Americans collect almost 20% of the nation's income-more than double their share in 1973. We have less equality of income than Venezuela, Kenya, or Yemen.
What economics Nobelist Paul Krugman terms "the Great Divergence" has until now been treated as little more than a talking point, a club to be wielded in ideological battles. But it may be the most important change in this country during our lifetimes-a sharp, fundamental shift in the character of American society, and not at all for the better.
The income gap has been blamed on everything from computers to immigration, but its causes and consequences call for a patient, non-partisan exploration. In The Great Divergence, Timothy Noah delivers this urgently needed inquiry, ignoring political rhetoric and drawing on the best work of contemporary researchers to peer beyond conventional wisdom. Noah explains not only how the Great Divergence has come about, but why it threatens American democracy-and most important, how we can begin to reverse it.
The Great Divergence is poised to be one of the most talked-about books of 2012, a jump-start to the national conversation about what kind of society we aspire to be in the 21st century: a land of equality, or a city on a hill-with a slum at the bottom.
What economics Nobelist Paul Krugman terms "the Great Divergence" has until now been treated as little more than a talking point, a club to be wielded in ideological battles. But it may be the most important change in this country during our lifetimes-a sharp, fundamental shift in the character of American society, and not at all for the better.
The income gap has been blamed on everything from computers to immigration, but its causes and consequences call for a patient, non-partisan exploration. In The Great Divergence, Timothy Noah delivers this urgently needed inquiry, ignoring political rhetoric and drawing on the best work of contemporary researchers to peer beyond conventional wisdom. Noah explains not only how the Great Divergence has come about, but why it threatens American democracy-and most important, how we can begin to reverse it.
The Great Divergence is poised to be one of the most talked-about books of 2012, a jump-start to the national conversation about what kind of society we aspire to be in the 21st century: a land of equality, or a city on a hill-with a slum at the bottom.
288 pages, Paperback
First published April 24, 2012
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Displaying 1 - 30 of 78 reviews
March 10, 2013
I initially was very excited to read this book as I thought he might propose some good solutions to the income inequality that has steadily increased over the past three decades. Instead, the entire book save the last chapter is an outlining of the various reasons we are in this economic mess of haves and mostly have-nots. The author finally gets to his short list of solutions to this problem and although in a more democratic country, they would make sense, other than electing Democrats into office, I can't see any other viable solution, given our ingrained cultural value of self-interest, a deeply divided populace and the inability of our elected officials to be able to sit down and negotiate various logical options without finger pointing and hatred preventing any real progress (cue screams of socialism and communism here). The main barrier to change is lack of power, which the 1% have in spades and can do whatever they want. They've done an excellent job of pitting the middle class against the poor so that people will never come together for a revolution. Instead, we'll just keep fighting each other for the "cake" they allow us and hope we can pay the electric bill. Soak the rich? How do you do that exactly? Maybe Warren Buffett will leave us his fortune when he dies. Universalize preschool? Throwing money at the problem does not help, say the people. Fatten government payrolls? Ha! Reregulate Wall Street and banks? Heaven must be nice, but we live in the United States of America. There are a couple more, but you get the idea. Bummer. Guess we're stuck.
March 6, 2017
There's really no problem with the content of Timothy Noah's the Great Divergence: America's Growing Inequality Crisis and What We Can Do about It. Chapter by chapter, he summarizes the consensus among liberal economists and thinkers about the prime factors that have created the staggering wealth inequality that exists in present day America. Starting around 1980, this divergence of wealth (as opposed to the Great Compression of 1930-1980) has become an increasingly challenging political grenade.
I've read Noah for many years both at Slate and the New Republic. He is a fine journalist and his analysis is not wrong. However, the book drags like nobody's business. I'm pretty much the target audience for this kind of thing. I care deeply about this subject and share most of Noah's political assumptions. But if it was hard for me to read, it's going to be even harder for those that may fall outside of the target audience.
It's just needlessly dry. You'd expect as much if you picked up a book by Thomas Piketty. But from Noah, you'd like some sense of narrative momentum or at least occasional verbal flourishes to keep your attention. By and large, you won't get it.
There's plenty of good information here. I liked the immigration chapter a lot, since it's a topic that I've had a hard time clarifying my thinking about. The taxation, globalization, and decline of unions chapters are fine if somewhat cursory.
And, as many reviewers have mentioned, the last chapter is devoted to solutions to the crisis. I once read about something called the "Chapter Ten Problem." The idea is that an author might spend a whole book outlining a problem in a convincing way. At the end, they feel the book cannot be complete unless they offer some kind of proposed solutions. However, thoroughly outlining a problem and coming up with adequate solutions are two different skill sets and that's why you get so many tacked on chapters at the end of books with solutions obviously not equal to the task of solving the problems the book is mostly devoted to describing.
Well, this book has a Chapter Ten Problem. Noah's solutions are nothing you haven't heard a hundred times before. Substantially raise taxes on the rich. (Somehow) revitalize the labor movement. Allow more skilled immigrants into the country. Vote for Democrats. And so on.
Noah himself admits that his solutions are politically impossible to achieve in the present environment. That's not my issue with them though. Even if they were politically possible, I'm not at all sure they are up to the job of actually accomplishing much. If Noah is going to suggest politically impossible solutions, he might as well have considered more radical solutions. There isn't much that he suggests that a mainstream Democratic politician wouldn't agree with (though perhaps they would be reluctant to raise taxes on the rich to the pre-Reagan era levels that Noah prescribes).
The Great Divergence does the job it sets out to do. There's nothing wrong with it on substance. But rather than submitting to the "soft bigotry of low expectations," I have to say I expected more. I thought this book would be a fun, enervating, insightful read; instead it's adequate but hardly essential reading.
I've read Noah for many years both at Slate and the New Republic. He is a fine journalist and his analysis is not wrong. However, the book drags like nobody's business. I'm pretty much the target audience for this kind of thing. I care deeply about this subject and share most of Noah's political assumptions. But if it was hard for me to read, it's going to be even harder for those that may fall outside of the target audience.
It's just needlessly dry. You'd expect as much if you picked up a book by Thomas Piketty. But from Noah, you'd like some sense of narrative momentum or at least occasional verbal flourishes to keep your attention. By and large, you won't get it.
There's plenty of good information here. I liked the immigration chapter a lot, since it's a topic that I've had a hard time clarifying my thinking about. The taxation, globalization, and decline of unions chapters are fine if somewhat cursory.
And, as many reviewers have mentioned, the last chapter is devoted to solutions to the crisis. I once read about something called the "Chapter Ten Problem." The idea is that an author might spend a whole book outlining a problem in a convincing way. At the end, they feel the book cannot be complete unless they offer some kind of proposed solutions. However, thoroughly outlining a problem and coming up with adequate solutions are two different skill sets and that's why you get so many tacked on chapters at the end of books with solutions obviously not equal to the task of solving the problems the book is mostly devoted to describing.
Well, this book has a Chapter Ten Problem. Noah's solutions are nothing you haven't heard a hundred times before. Substantially raise taxes on the rich. (Somehow) revitalize the labor movement. Allow more skilled immigrants into the country. Vote for Democrats. And so on.
Noah himself admits that his solutions are politically impossible to achieve in the present environment. That's not my issue with them though. Even if they were politically possible, I'm not at all sure they are up to the job of actually accomplishing much. If Noah is going to suggest politically impossible solutions, he might as well have considered more radical solutions. There isn't much that he suggests that a mainstream Democratic politician wouldn't agree with (though perhaps they would be reluctant to raise taxes on the rich to the pre-Reagan era levels that Noah prescribes).
The Great Divergence does the job it sets out to do. There's nothing wrong with it on substance. But rather than submitting to the "soft bigotry of low expectations," I have to say I expected more. I thought this book would be a fun, enervating, insightful read; instead it's adequate but hardly essential reading.
January 17, 2013
In 1910, the richest 1% accounted for 18% of the nation’s income (the peak of Mark Twain’s “Gilded Age”). Today, the richest 1% account for 24% of the nation’s income. Timothy Noah’s book takes a look at why this wealth gap has increased so much over the last few decades and what we can do to reverse that trend.. He shows how America’s enduring belief in social mobility blinds us to widening income inequality. Noah identifies various reasons for the growing income gap. First he dispenses with the factors that have had little effect. Despite race and gender inequality the Black-White income gap has actually not increased and the male- female wage gap has actually shrunk by nearly half. There is also little evidence that immigration harms the economic interests of native-born Americans: immigrants actually stimulate the economy by providing cheap labor (although cheap labor does drive down wages for high school dropouts). Computers and automation have eliminated some middle wage jobs but they also create new jobs so technology cannot be blamed. The effect of international trade is negligible but might still be a contributing factor. Noah shows how each of these elements may have had a small effect but points to other factors that have had a larger effect: the anti-poor and anti-working class attitude of today’s politicians, the decline of labor unions (since unions reduce income disparities among members), the redistribution of wealth upwards to the richest 10% due to regressive taxation policies, the paltry increases in the minimum wage, and the failings of our educational system to increase the supply of better educated workers. In the “what we can do about it” portion of the book, Noah advocates for robust policy action on all fronts. What makes the book such a bracing read is that Noah retains a health skepticism towards any single theory for rising wealth inequality. He shares research on either side of each argument, which makes this book a worthwhile read for both liberals and conservatives. You may not agree with everything he says but it’s sure to stimulate a health debate.
June 12, 2012
I saw this one reviewed in the NY Times. It's a great overview of the growing income disparity in this country. The author does a good job of presenting the data and discussing the key elements. The background is intelligently presented but written for the general reader.
The final chapter presents the author's ideas on how to address this growing issue. Nothing new but articulated well. The steps include:
1. Increase taxes on the rich. Not going to solve the debt crisis or income disparity. But tax policy continues to be the single stingiest tool to put more balance in the income flow.
2. Seriously address college costs. University educations are in danger of becoming a rich only advantage.
3. Revitalize the labor movement. Unions not only helped workers earn more - they served as watch dogs that kept executive comp in control.
4. Break up the big banks and restore many of the regulatory controls that disappeared in recent years.
5. Vote for democratic presidential candidates. Historical data shows income disparity grows during business permissive republican administrations and contracts during democratic administrations.
The final chapter presents the author's ideas on how to address this growing issue. Nothing new but articulated well. The steps include:
1. Increase taxes on the rich. Not going to solve the debt crisis or income disparity. But tax policy continues to be the single stingiest tool to put more balance in the income flow.
2. Seriously address college costs. University educations are in danger of becoming a rich only advantage.
3. Revitalize the labor movement. Unions not only helped workers earn more - they served as watch dogs that kept executive comp in control.
4. Break up the big banks and restore many of the regulatory controls that disappeared in recent years.
5. Vote for democratic presidential candidates. Historical data shows income disparity grows during business permissive republican administrations and contracts during democratic administrations.
June 20, 2016
This is part of the recent trend in books addressing the issue of economic inequality. It has the benefits of being short and easy to read. It tends to be a little too similar to the others. Maybe that’s unfair, as this was actually one of the earlier ones out, but in many ways I felt like I was just confirming stuff I’ve already read.
Noah believes that inequality is increasing and that’s a bad thing for out nation, our society, our politics, and our economy. It began in the 1970s, but then hard times depressed everyone’s wages. The middle class stagnated, but so did everyone else. You didn’t really see the divergence get going until 1979, ending the Great Compression (making this the second book I’ve read recently to use the phrase: Great Compression).
There’s a strong belief in upward mobility in the US, but it’s not really born out by the facts. In reality, the US compares poorly with western Europe in this. Much of wealth in inherited. (Good news: UK and Italy are even worse!) Growing income inequality is NOT linked to race and gender, as those inequalities have held stable. There are less job opportunities for working class men. Median skill jobs are really down. Unskilled are about the same, and highly skilled are doing fine (on the good end of the divergence) but the medium skilled ones are getting destroyed. Overall, income is down since the 1970s, and there is less job security. Upshot: there is a 60-fold (!) increase in credit card debt since 1968. Food and clothing is cheaper, but housing, health care, education, transportation are more expensive. There is more divorce as men are less economically necessary for a family.
Looking at some issues – is immigration driving down wages? It happened in the 19th century. Immigration is linked to growth, but then again growth itself is selective in America and some immigrants coming in are the skilled ones. Immigration has a mild impact on the middle class, it’s more on high school drop outs. Illegal immigration has moved into construction as that has become less unionized. The flow of illegals has stopped/reversed since 2008, but we’ve had a huge influx in inequality since then. Mexico itself has fewer births, more education, more money, and an improving economy. There is an increasing belief that the rise of China has hurt US wages. But the 21st century even holdouts to this viewpoint were coming around.
The middle class shrinking began in the 1970s. Technology creates and destroys jobs. But the jobs lost are more middle class. Rule-based jobs are the ones killed: blue-collar jobs and administrative support. Service jobs are up. BUT: computers can’t explain a lot of middle class economic decline. Unlike most industrial nations, there’s been a slowdown in education. By 1985, demand for college educations exceeded the supply and the premium of a college degree has doubled since 1980. But tuition is too high.
Until recently, academics didn’t think Reagan caused the Divergence at all. They thought it was external, long-term trends. That’s changing. It wasn’t so much the tax rate going down as it was the decline in corporate taxes and estate taxes. Business influence in DC has gone up tremendously due to lobbying. The US Chamber of Commerce spends $132 million, Proctor & Gamble $45 million, General Electric $39 million – this is for one year.
We’ve seen a decline in unionization. Wal-Mart is famous for their bullying tactics – perfectly legal, and leaves a mark. The one time there was some unionization – 10 butchers in one area voted to join a union – Wal-Mart responded by getting rid of all butchers, moving to outside suppliers instead (saying it was unrelated, of course). In 1979, 21% of workers were in a union. Now its 12% (and only 7% of the private sector). The 1950 Treaty of Detroit was a high-water mark for cooperation, as it had a C.O.L.A – but no one expected 1970s inflation. Taft-Hartley halted the increased place of unions. Reagan gave us an openly anti-union president.
The Great Divergnce really has it’s own internal divergence. It’s not just the rich, but the rich within the rich. In the Divergence, the top 10% went from 34% to 48% of US wages. The 1% went from 23% to 37%. The top 0.1% went from 10% to 21%. The top 0.01% went from 1.4% to 5%. The top 0.001% went from 0.1% to 1%. The higher up you go, the richer they got quicker. It’s unlike any other industrial country in this era. US chief executives get 2-3 times what European counterparts get. This wasn’t normal for most of the 20th century. A 1993 bill to dampen executive compensation was gotten around easily. Compensation consultants are bullshit. Essentially, Wall Street ate the economy. 3 things happened to do this: 1) investment banks shifted from banking to trading, 2) they went from partnerships to publicly traded companies, and 3) less government regulartion. This trading gained an upside, but also became less stable.
Mind you, productivity has gone UP while wages have gone down. That’s disincentive to work harder. Or, the incentive is fear instead of progress. The Great Divergence is inequality, not opportunity. Inequality helped cause the 2008 meltdown. People have less money, so to help them feel better, give them easy credit – leads to debt and all that. Meltdown ensues. Also, economic inequality correlates with social inequality. We had free land, the big tech breakthroughs of 100 years ago and all that to help out. That might be gone. From 1978-2010, worker productivity was up 86% but compensation up 37%. Noah’s theory: the gains that should’ve gone to workers went to stockholders – and that is disproporiationally the already wealthy.
Noah has his solutions: tax the rich more, increase government payrolls, import more skilled labor, make preschool mandatory, control tuition costs, regulate Wall Street, vote Democratic, and revive organized labor. He’s aware much of this isn’t realistic, but it’s the best solutions. He thought Obama missed a chance in 2012. Romney easily typified all that was wrong with the economy, and Obama vilified him as such – but didn’t offer a countering vision on economic equality – no real plan. Note, the 1% has their own concerns different from the other 99% and that warps our nation due to their influence. Most care about jobs, but they care about deficits – guess who DC responds to?
Noah believes that inequality is increasing and that’s a bad thing for out nation, our society, our politics, and our economy. It began in the 1970s, but then hard times depressed everyone’s wages. The middle class stagnated, but so did everyone else. You didn’t really see the divergence get going until 1979, ending the Great Compression (making this the second book I’ve read recently to use the phrase: Great Compression).
There’s a strong belief in upward mobility in the US, but it’s not really born out by the facts. In reality, the US compares poorly with western Europe in this. Much of wealth in inherited. (Good news: UK and Italy are even worse!) Growing income inequality is NOT linked to race and gender, as those inequalities have held stable. There are less job opportunities for working class men. Median skill jobs are really down. Unskilled are about the same, and highly skilled are doing fine (on the good end of the divergence) but the medium skilled ones are getting destroyed. Overall, income is down since the 1970s, and there is less job security. Upshot: there is a 60-fold (!) increase in credit card debt since 1968. Food and clothing is cheaper, but housing, health care, education, transportation are more expensive. There is more divorce as men are less economically necessary for a family.
Looking at some issues – is immigration driving down wages? It happened in the 19th century. Immigration is linked to growth, but then again growth itself is selective in America and some immigrants coming in are the skilled ones. Immigration has a mild impact on the middle class, it’s more on high school drop outs. Illegal immigration has moved into construction as that has become less unionized. The flow of illegals has stopped/reversed since 2008, but we’ve had a huge influx in inequality since then. Mexico itself has fewer births, more education, more money, and an improving economy. There is an increasing belief that the rise of China has hurt US wages. But the 21st century even holdouts to this viewpoint were coming around.
The middle class shrinking began in the 1970s. Technology creates and destroys jobs. But the jobs lost are more middle class. Rule-based jobs are the ones killed: blue-collar jobs and administrative support. Service jobs are up. BUT: computers can’t explain a lot of middle class economic decline. Unlike most industrial nations, there’s been a slowdown in education. By 1985, demand for college educations exceeded the supply and the premium of a college degree has doubled since 1980. But tuition is too high.
Until recently, academics didn’t think Reagan caused the Divergence at all. They thought it was external, long-term trends. That’s changing. It wasn’t so much the tax rate going down as it was the decline in corporate taxes and estate taxes. Business influence in DC has gone up tremendously due to lobbying. The US Chamber of Commerce spends $132 million, Proctor & Gamble $45 million, General Electric $39 million – this is for one year.
We’ve seen a decline in unionization. Wal-Mart is famous for their bullying tactics – perfectly legal, and leaves a mark. The one time there was some unionization – 10 butchers in one area voted to join a union – Wal-Mart responded by getting rid of all butchers, moving to outside suppliers instead (saying it was unrelated, of course). In 1979, 21% of workers were in a union. Now its 12% (and only 7% of the private sector). The 1950 Treaty of Detroit was a high-water mark for cooperation, as it had a C.O.L.A – but no one expected 1970s inflation. Taft-Hartley halted the increased place of unions. Reagan gave us an openly anti-union president.
The Great Divergnce really has it’s own internal divergence. It’s not just the rich, but the rich within the rich. In the Divergence, the top 10% went from 34% to 48% of US wages. The 1% went from 23% to 37%. The top 0.1% went from 10% to 21%. The top 0.01% went from 1.4% to 5%. The top 0.001% went from 0.1% to 1%. The higher up you go, the richer they got quicker. It’s unlike any other industrial country in this era. US chief executives get 2-3 times what European counterparts get. This wasn’t normal for most of the 20th century. A 1993 bill to dampen executive compensation was gotten around easily. Compensation consultants are bullshit. Essentially, Wall Street ate the economy. 3 things happened to do this: 1) investment banks shifted from banking to trading, 2) they went from partnerships to publicly traded companies, and 3) less government regulartion. This trading gained an upside, but also became less stable.
Mind you, productivity has gone UP while wages have gone down. That’s disincentive to work harder. Or, the incentive is fear instead of progress. The Great Divergence is inequality, not opportunity. Inequality helped cause the 2008 meltdown. People have less money, so to help them feel better, give them easy credit – leads to debt and all that. Meltdown ensues. Also, economic inequality correlates with social inequality. We had free land, the big tech breakthroughs of 100 years ago and all that to help out. That might be gone. From 1978-2010, worker productivity was up 86% but compensation up 37%. Noah’s theory: the gains that should’ve gone to workers went to stockholders – and that is disproporiationally the already wealthy.
Noah has his solutions: tax the rich more, increase government payrolls, import more skilled labor, make preschool mandatory, control tuition costs, regulate Wall Street, vote Democratic, and revive organized labor. He’s aware much of this isn’t realistic, but it’s the best solutions. He thought Obama missed a chance in 2012. Romney easily typified all that was wrong with the economy, and Obama vilified him as such – but didn’t offer a countering vision on economic equality – no real plan. Note, the 1% has their own concerns different from the other 99% and that warps our nation due to their influence. Most care about jobs, but they care about deficits – guess who DC responds to?
October 4, 2019
Great summary of the literature on US inequality
Written in a very readable way, this book is one of the best introductions that one can have to the study of income inequality in the US. Although it's a bit dated, in remains relevant for today's discussion.
Written in a very readable way, this book is one of the best introductions that one can have to the study of income inequality in the US. Although it's a bit dated, in remains relevant for today's discussion.
July 12, 2013
By Richard Beales
Is rising U.S. income inequality a disaster, or just capitalism? In “The Great Divergence”, Timothy Noah analyses the 30-odd year trend, and concludes it’s a crisis. Yet earning differences are inevitable in any kind of market system. It’s arguably not so much inequality per se as the real decline in middle-class incomes that justifies serious concern.
The trend has made U.S. income distribution, as measured by the widely used Gini coefficient, among the most unequal in the Organisation for Economic Co-operation and Development. With a coefficient of 0.38 (after taxes and transfers) in the mid-2000s as cited by Noah, only Portugal, Turkey and Mexico were more unequal. “Economically speaking, the richest nation on earth is starting to resemble a banana republic”, Noah writes.
Such rhetoric reflects the author’s left-of-center political stance, as does his use of a phrase coined by economist Paul Krugman for the title of his book. Ideology doesn’t prevent him from a nuanced evaluation of a wide array of ideas and economic research about the causes of U.S. inequality. He doesn’t, for example, dismiss immigration as a factor. On the other hand, he makes an intriguing case that the Great Divergence owes something to the decline of organized labor, arguing that strong unions may have helped keep inequality stable or even narrowing in the midst of rising overall prosperity.
Noah isn’t entirely persuasive that income inequality, even growing inequality, is necessarily bad in itself. But he does shed light on how the American middle class has been hollowed out by economic changes, and how ordinary families have often seen little, no or negative changes in their inflation-adjusted paychecks - even as the rich have got much richer. In other words, the rising tide is lifting some boats far more than others. In the United States of late, some lesser craft are sinking.
A triennial Federal Reserve survey, released earlier this month, reinforces the point. Between 2007 and 2010, thanks to the financial crisis and presumably its effect on investment income, the rich - and everyone else except the poorest 20 percent of families - saw their median real incomes go down. Perhaps more significantly, the overall median U.S. family income in 2010 was also down more than 6 percent in real terms since the 2001 survey, against a decline of only just over 1 percent for the top decile of families.
Moreover, the median net worth of American families was down a sharp 27 percent, after inflation, over those nine years, while the median wealth within the top 10 percent of incomes was up 17 percent. The rich do get richer, even through tough times.
Noah discusses the impact of government policy on inequality and also shows how America isn’t the socially and economically mobile haven many of its citizens imagine. That’s important, because some observers claim, essentially, that inequality doesn’t matter in the United States, where everyone can improve their lot by working hard. It’s not that easy.
“The Great Divergence” is fuzzy in places. It pays too much attention to the huge wealth concentration in banks and boardrooms. The phenomenon exists - look no further than the planned purchase, revealed this week, of Hawaii’s sixth-largest island Lanai by Oracle billionaire Larry Ellison for a rumored $500 million or more - but it is more anecdote than the heart of the problem.
And in contrast to his analysis, Noah’s prescriptions seem a tad ideological. The rich should probably pay more tax. It’s hard to see why they shouldn’t pay at least the same rates as the relatively poor, preferably without the mind-numbing range of deductions and tweaks allowed by the current U.S. tax code. But proposing a 70 percent top marginal rate of income tax, even though that has existed in the past, seems unrealistic and not merely provocative, as the author may have intended.
Electing Democratic presidents, another proposal, rests on a record that shows they have generally overseen income gains across the board rather than just for the rich. But it would have been less cute to try to identify the relevant policies rather than the politics.
There are other suggestions in a relatively short concluding section. But Noah doesn’t claim to know all the answers. What he does do in the bulk of the book is raise important questions while providing a very readable and broad-ranging history of American income distribution over roughly the course of the 20th century. And even more than rising inequality, it’s the notion that the middle class is falling behind in absolute as well as relative terms - and in both income and wealth - that makes “The Great Divergence” worthwhile and well timed.
Is rising U.S. income inequality a disaster, or just capitalism? In “The Great Divergence”, Timothy Noah analyses the 30-odd year trend, and concludes it’s a crisis. Yet earning differences are inevitable in any kind of market system. It’s arguably not so much inequality per se as the real decline in middle-class incomes that justifies serious concern.
The trend has made U.S. income distribution, as measured by the widely used Gini coefficient, among the most unequal in the Organisation for Economic Co-operation and Development. With a coefficient of 0.38 (after taxes and transfers) in the mid-2000s as cited by Noah, only Portugal, Turkey and Mexico were more unequal. “Economically speaking, the richest nation on earth is starting to resemble a banana republic”, Noah writes.
Such rhetoric reflects the author’s left-of-center political stance, as does his use of a phrase coined by economist Paul Krugman for the title of his book. Ideology doesn’t prevent him from a nuanced evaluation of a wide array of ideas and economic research about the causes of U.S. inequality. He doesn’t, for example, dismiss immigration as a factor. On the other hand, he makes an intriguing case that the Great Divergence owes something to the decline of organized labor, arguing that strong unions may have helped keep inequality stable or even narrowing in the midst of rising overall prosperity.
Noah isn’t entirely persuasive that income inequality, even growing inequality, is necessarily bad in itself. But he does shed light on how the American middle class has been hollowed out by economic changes, and how ordinary families have often seen little, no or negative changes in their inflation-adjusted paychecks - even as the rich have got much richer. In other words, the rising tide is lifting some boats far more than others. In the United States of late, some lesser craft are sinking.
A triennial Federal Reserve survey, released earlier this month, reinforces the point. Between 2007 and 2010, thanks to the financial crisis and presumably its effect on investment income, the rich - and everyone else except the poorest 20 percent of families - saw their median real incomes go down. Perhaps more significantly, the overall median U.S. family income in 2010 was also down more than 6 percent in real terms since the 2001 survey, against a decline of only just over 1 percent for the top decile of families.
Moreover, the median net worth of American families was down a sharp 27 percent, after inflation, over those nine years, while the median wealth within the top 10 percent of incomes was up 17 percent. The rich do get richer, even through tough times.
Noah discusses the impact of government policy on inequality and also shows how America isn’t the socially and economically mobile haven many of its citizens imagine. That’s important, because some observers claim, essentially, that inequality doesn’t matter in the United States, where everyone can improve their lot by working hard. It’s not that easy.
“The Great Divergence” is fuzzy in places. It pays too much attention to the huge wealth concentration in banks and boardrooms. The phenomenon exists - look no further than the planned purchase, revealed this week, of Hawaii’s sixth-largest island Lanai by Oracle billionaire Larry Ellison for a rumored $500 million or more - but it is more anecdote than the heart of the problem.
And in contrast to his analysis, Noah’s prescriptions seem a tad ideological. The rich should probably pay more tax. It’s hard to see why they shouldn’t pay at least the same rates as the relatively poor, preferably without the mind-numbing range of deductions and tweaks allowed by the current U.S. tax code. But proposing a 70 percent top marginal rate of income tax, even though that has existed in the past, seems unrealistic and not merely provocative, as the author may have intended.
Electing Democratic presidents, another proposal, rests on a record that shows they have generally overseen income gains across the board rather than just for the rich. But it would have been less cute to try to identify the relevant policies rather than the politics.
There are other suggestions in a relatively short concluding section. But Noah doesn’t claim to know all the answers. What he does do in the bulk of the book is raise important questions while providing a very readable and broad-ranging history of American income distribution over roughly the course of the 20th century. And even more than rising inequality, it’s the notion that the middle class is falling behind in absolute as well as relative terms - and in both income and wealth - that makes “The Great Divergence” worthwhile and well timed.
July 24, 2012
Timothy Noah is a well respected American journalist who works as a senior editor and columnist for the New Republic magazine. He has also written for Slate, the Wall Street Journal, U.S. News & World Report, the New York Times, the Washington Post, Harper's, and Fortune. In 2011 he was awarded the Hillman Prize for a 10-part Slate series on income inequality in the U.S. that he has now expanded into "The Great Divergence".
Noah goes into great detail in describing how the 1% pulled away from the 99% in the last thirty years and why America has greater inequality today than countries like Kenya, Venezuela or Yemen. Because he is a great writer he managed to do this in an interesting and even entertaining style as he almost dispassionately demolishes all arguments against the reality of income inequality in our modern society.
Those reasons include a failure by America’s schools to help workers keep pace with the skills that advancing technology demand, rising competition with China, India and other low-wage countries and the lack of minimum wage laws to keep up with inflation. But even more important in his view was the decline of unions, especially in the private sector and an unending attack on workers by right wing politicians in both mainstream and conservative wings of the Republican Party.
But it is his proposed solutions that make reading Noah's book worthwhile. While he agrees that a more progressive taxation system would help reduce inequality he doesn't see it as the total solution. He notes that in 1979 the American taxation system helped moderate inequality by 23% while in 2007 after the Bush tax cuts it had dropped to 17%. But he does advocate for higher taxes on incomes over $250k and more tax brackets for incomes between $1million and $10 million a year.
His newish ideas include hiring more federal government workers as part of a stimulus that could raise millions of low income citizens into the middle class, a national child care program and reducing the cost of university and college education. He also argues for more regulation of financial markets which is not surprising given the American experience with unfettered markets and the mess that caused. And finally he calls for specific measures to revive the American trade union movement, part of which will involve electing more Democrats at every level including re-electing President Barack Obama.
"The Great Divergence" is a well-written and well-researched catalogue of the sins that free markets and neo-conservatives have committed on the road to creating the social and economic monster that is income inequality. But it is also another marker that says we have had enough and that the 99% are ready to reclaim our economies and our democracies.
Noah goes into great detail in describing how the 1% pulled away from the 99% in the last thirty years and why America has greater inequality today than countries like Kenya, Venezuela or Yemen. Because he is a great writer he managed to do this in an interesting and even entertaining style as he almost dispassionately demolishes all arguments against the reality of income inequality in our modern society.
Those reasons include a failure by America’s schools to help workers keep pace with the skills that advancing technology demand, rising competition with China, India and other low-wage countries and the lack of minimum wage laws to keep up with inflation. But even more important in his view was the decline of unions, especially in the private sector and an unending attack on workers by right wing politicians in both mainstream and conservative wings of the Republican Party.
But it is his proposed solutions that make reading Noah's book worthwhile. While he agrees that a more progressive taxation system would help reduce inequality he doesn't see it as the total solution. He notes that in 1979 the American taxation system helped moderate inequality by 23% while in 2007 after the Bush tax cuts it had dropped to 17%. But he does advocate for higher taxes on incomes over $250k and more tax brackets for incomes between $1million and $10 million a year.
His newish ideas include hiring more federal government workers as part of a stimulus that could raise millions of low income citizens into the middle class, a national child care program and reducing the cost of university and college education. He also argues for more regulation of financial markets which is not surprising given the American experience with unfettered markets and the mess that caused. And finally he calls for specific measures to revive the American trade union movement, part of which will involve electing more Democrats at every level including re-electing President Barack Obama.
"The Great Divergence" is a well-written and well-researched catalogue of the sins that free markets and neo-conservatives have committed on the road to creating the social and economic monster that is income inequality. But it is also another marker that says we have had enough and that the 99% are ready to reclaim our economies and our democracies.
June 5, 2012
The author of this book is a journalist, so his explanations of complex topics are remarkably clear and accessible to the ordinary person. He examines varied possible reasons for the decline of the middle class and the increasing divide between the very rich and everyone else in this country. He opens the book with a look at other times in American history when such an economic divide has caused social unrest. One of these periods was the very early twentieth century, when he says radical political movements led to anarchist bombings and crackdowns on any radical groups. As Mr. Noah says on page 11, "That was when the richest 1 percent accounted for 18 percent of the nation's income. By 2007, their share would balloon to 24 percent..." He noted that the early 20th century was a period also when economic well being came to be associated with income rather than property ownership as a result of the move from an agricultural base (when owning land denoted wealth) to an industrial base. Mr. Noah includes many graphs and charts that make visible the points his statistics are making. One interesting graph (on page 24) shows the extent of economic divergence in this country from 1920 to the present. It is interesting to note that in 1928 income share for the top 1% was also 24%, matching the numbers for 2007. Later chapters examine possible reasons for this divergence, always with an eye to the historical record as a basis for comparison. He looks at the role of race and gender in social economics, at immigration, the educational premium (noting that it keeps shifting upward, so that now a graduate degree gives the edge once associated with an undergraduate degree), offshoring and outsourcing (with a look at which jobs may be safest), partisan politics (with a provocative statement that voting Democrat may better protect against extreme economic divergence),at the role of the demise of labor unions, and finally at the rise of the very rich in other countries as compared to our own. His final two chapters, "Why it Matters" and "What to Do", offer possible prescriptions for moderating the continually widening income gap. He acknowledges that many of them probably won't be taken, but I like the fact that he does offer some solutions. The important thing about a book like this is to shine a spotlight on this issue and to get the conversation started.
**A good book to partner with this one is "Coming Apart: The State of White America, 1960-2010" by Charles Murray.
**A good book to partner with this one is "Coming Apart: The State of White America, 1960-2010" by Charles Murray.
September 8, 2012
In his case to revive the Labor Movement, Noah states:
"[T]here's no possibility that people who lack economic clout as individuals will ever be able to count on their bosses altruism (or even enlightened self-interest) to provide a decent wage. The age of corporate fraternalism is long gone, and it would never have come into being without the existence or threat of strong unions. Businesses treat their least powerful employees as poorly as they can get away with, end of story. Blue-collar workers weren't given pensions, previously offered only in executive suites, because the nations industrialist suffered a pang of conscience. They got them because Walter Reuther and other union leaders pushed management hard in negotiating labor contracts, with the very real threat of strikes always lurking in the background. Moreover, large forward strides toward social justice - the civil rights movement of the 1960s, the health-care reform bill in 2010 - rely on support from unions because they are the only permanent institutions wielding any political power at all that are consistently dedicated to helping ordinary people."
Well said.
"[T]here's no possibility that people who lack economic clout as individuals will ever be able to count on their bosses altruism (or even enlightened self-interest) to provide a decent wage. The age of corporate fraternalism is long gone, and it would never have come into being without the existence or threat of strong unions. Businesses treat their least powerful employees as poorly as they can get away with, end of story. Blue-collar workers weren't given pensions, previously offered only in executive suites, because the nations industrialist suffered a pang of conscience. They got them because Walter Reuther and other union leaders pushed management hard in negotiating labor contracts, with the very real threat of strikes always lurking in the background. Moreover, large forward strides toward social justice - the civil rights movement of the 1960s, the health-care reform bill in 2010 - rely on support from unions because they are the only permanent institutions wielding any political power at all that are consistently dedicated to helping ordinary people."
Well said.
July 19, 2012
Of the many books published recently about inequality in the United States, this one is the most balanced between readability and rigor. Noah has produced a disciplined, engaging book that systematically addresses each public debate about the causes of income inequality - ideology, technology, immigration, et cetera - then sets to gauging the importance of each cause to the result. By poring through the literature and constantly critiquing both the literature and his assumptions, Noah provides a fine-grained portrait of inequality that is clear-headed and sobering. He provides some possible solutions. Sadly, as always in books like this, they seem totally right and utterly impossible. But that doesn't take away from the accomplishment of synthesizing the economic data into a readable whole.
June 24, 2012
If you have the nagging feeling that the American middle class is disappearing, here is the well researched proof that you are not mistaken. The income gap in the USA between the very rich and everybody else is the largest since the Great Depression, although similar divergence is not happening in most other developed countries as observed using the Gini coefficient. Upward mobility also becoming a thing of the past ... Causes and non-causes are discussed, and as usual, a list of few suggestions are offered how this trend could be reversed.
September 24, 2012
In September 2010, Noah wrote an excellent series of articles for Slate, also titled The Great Divergence, discussing the rise in inequality since the 1970s. This book is a tightly-written and clearly argued full-length extension of those articles, and the extra room permits him to go into a bit more detail about the various factors behind the dramatic changes in the distribution of both wealth and income we've seen, though the book focuses on income. For many years the debate followed a similar trajectory to the debate over global warming/climate change: first, a denial that inequality existed; second, a denial that it was deliberately caused by policy; third a denial that it could be reduced by counter-policies; fourth, a denial that it should be reduced at all. This pattern of reaction was made easier by the fact that most economists talk about inequality in mathematical terms, as a dry relationship of numerical ratios. However, in this post-Occupy Wall Street era, inequality is discussed much more openly in the human terms - debt burdens, homes foreclosed, pensions cut, college plans abandoned, dreams deferred - and I think a constituency is building that will be more willing to tackle this issue.
A lot of these books describe the age of minimum inequality - the roughly 3 decades after the end of World War 2 - as a sort of Golden Age; for example, Noah's chapter describing it is called Paradise Lost. It's almost inarguable that if you're a heterosexual white male (if not, condolences), then in relative terms that time and place was about as swell for us as it was possible to be. There were plenty of jobs, cheap housing, low crime, robust social institutions, and a constantly improving American way of life that delivered a miraculous increase in the standard of living that handily beat anything since. A change in income inequality isn't the same thing as a drop in the quality of life, but since much of life is positional, changes in the amount of income each quartile has can tell us something about how people's lives are going. Noah discusses a few of the factors that economists think have contributed towards inequality:
- Marriage patterns. There's a comparison of two families, the Kerleys and Blentlingers, who are separated by a generation. Whereas the first family was able to get by with a single (male) breadwinner, thanks to high manufacturing wages at a job that didn't require a college education, the latter family required two incomes to maintain about the same lifestyle. The rise in dual incomes is not itself responsible for inequality.
- Single parenthood. Somewhat counterintuitively, two incomes are not necessarily more stable than one, as that doubles the chances that one parent will lose or change jobs. Still, the drop in marriage rates isn't responsible either.
- Immigration. Unskilled labor is definitely pressured by increased immigration, but most professions aren't unskilled. More immigration of skilled immigrants might actually decrease inequality, as many professions are somewhat protectionist, in that there are occupational licensing barriers. Interestingly, cities, which have the most immigrants, are the richest parts of any country (e.g. New York City), but also very unequal.
- Rising educational attainment. This is a big one, as despite soaring college costs there is still a large college wage premium. The jobs of the future will require more and more college; a bachelor's is the new high school diploma.
- Offshoring. This is somewhat inconclusive; the effect on inequality is probably large with respect to manufacturing jobs (just see Ohio), but ambiguous when it comes to service sector jobs, since many of them cannot be outsourced well.
- Trade with low-wage nations. Noah gives a number here and says that changing trade patterns is responsible for "12 to 13%" of the rise in inequality. The effects have probably increased over time, as trade with low-wage nations like China has become more important relative to trade with high-wage countries like Germany and Japan. It's hard to measure though, as deciding what proportion of the value of something like an iPhone stays in the US is tricky.
- De-unionization. This is huge, and possibly the one thing more crucial to inequality's rise than any single other factor, given labor unions' tendency to affect all those other things (e.g. by resisting offshoring, opposing tuition hikes, promoting more stable families due to job security, etc).
- Rise of the Stinking Rich. That's Noah's phrase, and he's referring to the "fractal" aspect of inequality, as the very rich pull away from the sort-of rich, the extremely rich pull away from the very rich, etc. Institutions are set up to reward rich people to a much greater degree than before via phenomena like soaring executive compensation; it's getting harder to get rich, but once you are rich, it's easy to stay that way.
- Financialization. The increasing extent to which the US economy is based on finance is part of that last factor. Cosma Shalizi once made an interesting point on his blog about how finance types claim they're central to a prosperous economy since they know how to efficiently allocate capital, yet somehow as finance has become more important growth has only slowed, over all. There a great graph on p. 169 of the inverse relationship between total US debt vs the income share of the bottom 99% that makes you wonder if the economy has become nothing more than an engine for the prosperity of rich people.
It's not in this book, but in October 2010 Barry Ritholtz linked to a notable poll showing that when you ask people about wealth distribution, they not only underestimate how concentrated it is, but also express a preference for a much more egalitarian distribution than anyone is proposing. Noah, in his What Is To Be Done section, proposes a mix of backwards-looking policies that essentially reverse the changes of the last few decades, and a few forward-looking proposals that recognize that it's neither possible nor desirable to simply roll back the US economy to 1965.
Backwards-looking proposals:
- Soak the rich. His phrase, again. Taxes on the rich get lower and lower, yet mysteriously we don't see any more growth. The Republican Party talks about Job Creators a lot, yet the evidence suggests that taxes could be a lot higher before those geese stopped laying golden eggs. However, I personally would be open to at least looking at conservative proposals to restructure the tax system, e.g. by taxing consumption more heavily than income.
- Reregulate Wall Street. Keynes put it best: "When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."
- More Democrats. The Republican Party is basically openly committed to increasing inequality, and there's only one way to stop them. However, I myself am a pretty solid Democrat, yet I'm wary of proposals that rely simply on entrenching one specific political party; my preference would be a parliamentary system that would broaden the range of acceptable opinions in Washington and make parties more accountable.
- More unions. For all their flaws, unions are an essential counterweight to the power of corporations, and in addition are also what Tocqueville calls "secondary institutions" that encourage citizen participation in various spheres of civic life. No other rich country has seen the dramatic drop in income equality that the US has, and likewise no other rich country has de-unionized to the same degree. It's more than correlation.
Forwards-looking proposals:
- More government employees/new WPA. It's very disappointing that the stimulus did not do more to directly employ more workers, and its provisions to retain government employees could have been greater. Greater public employment, beyond its immediate benefits in improving suffering public services and reducing inequality, might make people less angry at what they see as far-off, lazy, unaccountable government.
- More high-skill immigration. America is perfectly happy to train clever foreigners in our universities, but for some reason we're even happier to then force them to go back home so that we lose out on the businesses they start. We could reduce things like doctor shortages at the same time as we bolster the middle class.
- Universal preschool. The earlier in life we start educating children, the better their lives will be. It's the ultimate return on investment.
- Fix college costs. Rising tuition costs are a crippling burden on graduates, and reducing them will allow graduates to spend more time on building careers in rather than taking the first low-wage job that comes along so they can start making payments. Student loans are a trillion-dollar leech on younger generations.
Many of the leading economists who have studied inequality are discussed extensively - David Autor, George Borjas, Jacob Hacker, Paul Krugman, Emmanuel Saez, and Scott Winship all show up. I would recommend this book in concert with two broader works, Hacker's Winner-Take-All Politics and Krugman's The Conscience of a Liberal, both mentioned here, and both of which tie the specific issue of income inequality to both our current political dysfunction and the question of what kind of country we want to leave to our descendants.
A lot of these books describe the age of minimum inequality - the roughly 3 decades after the end of World War 2 - as a sort of Golden Age; for example, Noah's chapter describing it is called Paradise Lost. It's almost inarguable that if you're a heterosexual white male (if not, condolences), then in relative terms that time and place was about as swell for us as it was possible to be. There were plenty of jobs, cheap housing, low crime, robust social institutions, and a constantly improving American way of life that delivered a miraculous increase in the standard of living that handily beat anything since. A change in income inequality isn't the same thing as a drop in the quality of life, but since much of life is positional, changes in the amount of income each quartile has can tell us something about how people's lives are going. Noah discusses a few of the factors that economists think have contributed towards inequality:
- Marriage patterns. There's a comparison of two families, the Kerleys and Blentlingers, who are separated by a generation. Whereas the first family was able to get by with a single (male) breadwinner, thanks to high manufacturing wages at a job that didn't require a college education, the latter family required two incomes to maintain about the same lifestyle. The rise in dual incomes is not itself responsible for inequality.
- Single parenthood. Somewhat counterintuitively, two incomes are not necessarily more stable than one, as that doubles the chances that one parent will lose or change jobs. Still, the drop in marriage rates isn't responsible either.
- Immigration. Unskilled labor is definitely pressured by increased immigration, but most professions aren't unskilled. More immigration of skilled immigrants might actually decrease inequality, as many professions are somewhat protectionist, in that there are occupational licensing barriers. Interestingly, cities, which have the most immigrants, are the richest parts of any country (e.g. New York City), but also very unequal.
- Rising educational attainment. This is a big one, as despite soaring college costs there is still a large college wage premium. The jobs of the future will require more and more college; a bachelor's is the new high school diploma.
- Offshoring. This is somewhat inconclusive; the effect on inequality is probably large with respect to manufacturing jobs (just see Ohio), but ambiguous when it comes to service sector jobs, since many of them cannot be outsourced well.
- Trade with low-wage nations. Noah gives a number here and says that changing trade patterns is responsible for "12 to 13%" of the rise in inequality. The effects have probably increased over time, as trade with low-wage nations like China has become more important relative to trade with high-wage countries like Germany and Japan. It's hard to measure though, as deciding what proportion of the value of something like an iPhone stays in the US is tricky.
- De-unionization. This is huge, and possibly the one thing more crucial to inequality's rise than any single other factor, given labor unions' tendency to affect all those other things (e.g. by resisting offshoring, opposing tuition hikes, promoting more stable families due to job security, etc).
- Rise of the Stinking Rich. That's Noah's phrase, and he's referring to the "fractal" aspect of inequality, as the very rich pull away from the sort-of rich, the extremely rich pull away from the very rich, etc. Institutions are set up to reward rich people to a much greater degree than before via phenomena like soaring executive compensation; it's getting harder to get rich, but once you are rich, it's easy to stay that way.
- Financialization. The increasing extent to which the US economy is based on finance is part of that last factor. Cosma Shalizi once made an interesting point on his blog about how finance types claim they're central to a prosperous economy since they know how to efficiently allocate capital, yet somehow as finance has become more important growth has only slowed, over all. There a great graph on p. 169 of the inverse relationship between total US debt vs the income share of the bottom 99% that makes you wonder if the economy has become nothing more than an engine for the prosperity of rich people.
It's not in this book, but in October 2010 Barry Ritholtz linked to a notable poll showing that when you ask people about wealth distribution, they not only underestimate how concentrated it is, but also express a preference for a much more egalitarian distribution than anyone is proposing. Noah, in his What Is To Be Done section, proposes a mix of backwards-looking policies that essentially reverse the changes of the last few decades, and a few forward-looking proposals that recognize that it's neither possible nor desirable to simply roll back the US economy to 1965.
Backwards-looking proposals:
- Soak the rich. His phrase, again. Taxes on the rich get lower and lower, yet mysteriously we don't see any more growth. The Republican Party talks about Job Creators a lot, yet the evidence suggests that taxes could be a lot higher before those geese stopped laying golden eggs. However, I personally would be open to at least looking at conservative proposals to restructure the tax system, e.g. by taxing consumption more heavily than income.
- Reregulate Wall Street. Keynes put it best: "When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done."
- More Democrats. The Republican Party is basically openly committed to increasing inequality, and there's only one way to stop them. However, I myself am a pretty solid Democrat, yet I'm wary of proposals that rely simply on entrenching one specific political party; my preference would be a parliamentary system that would broaden the range of acceptable opinions in Washington and make parties more accountable.
- More unions. For all their flaws, unions are an essential counterweight to the power of corporations, and in addition are also what Tocqueville calls "secondary institutions" that encourage citizen participation in various spheres of civic life. No other rich country has seen the dramatic drop in income equality that the US has, and likewise no other rich country has de-unionized to the same degree. It's more than correlation.
Forwards-looking proposals:
- More government employees/new WPA. It's very disappointing that the stimulus did not do more to directly employ more workers, and its provisions to retain government employees could have been greater. Greater public employment, beyond its immediate benefits in improving suffering public services and reducing inequality, might make people less angry at what they see as far-off, lazy, unaccountable government.
- More high-skill immigration. America is perfectly happy to train clever foreigners in our universities, but for some reason we're even happier to then force them to go back home so that we lose out on the businesses they start. We could reduce things like doctor shortages at the same time as we bolster the middle class.
- Universal preschool. The earlier in life we start educating children, the better their lives will be. It's the ultimate return on investment.
- Fix college costs. Rising tuition costs are a crippling burden on graduates, and reducing them will allow graduates to spend more time on building careers in rather than taking the first low-wage job that comes along so they can start making payments. Student loans are a trillion-dollar leech on younger generations.
Many of the leading economists who have studied inequality are discussed extensively - David Autor, George Borjas, Jacob Hacker, Paul Krugman, Emmanuel Saez, and Scott Winship all show up. I would recommend this book in concert with two broader works, Hacker's Winner-Take-All Politics and Krugman's The Conscience of a Liberal, both mentioned here, and both of which tie the specific issue of income inequality to both our current political dysfunction and the question of what kind of country we want to leave to our descendants.
February 11, 2019
A strong thesis backed up by impeccable research showing the US is on the path to continue ramping up income inequality. My only wish is that the conclusion had done a better job of synthesizing the research, which was tackled topic by topic in chapter form. I would have liked a final summation of how he saw all of the research connecting in a final answer to his question about the causes of the income inequality we see increasing in the US. Effectively he argues that it has the most to do with politics but also has to do with immigration, trade, and the premium currently put on a college education. But I wanted more synthesis. He’s got some great charts that show the income inequality ramps up greatly under Republican leadership and that under Democrats, everyone has done a bit better (but since it is averaged together that makes me wonder if the Clinton presidency during the 90s tech boom exaggerated or skews the data).
April 15, 2023
Noah investigates the growing problem of income inequality in the U.S., devoting the bulk of the book to untangling what the causes are. (Short answer: Mostly political power wielded by the very rich, though foreign trade and demand for college graduates also contribute.) It was helpful that he devoted considerable space to suspects that turn out not to be significant contributors. A summary would have been nice. He also includes a chapter each on why income inequality is a problem and what to do about it. Regarding the former, I would have liked to see more reason given for his one-line dismissal of Wilkinson & Pickett's _The Spirit Level_, which focused on that topic, and none of whose points made it into Noah's book. Noah's book was published in 2012, but the problem has only become worse since then, so it is still worth reading.
May 17, 2017
Di qua, i pochi che possiedono quasi tutto, di là, le moltitudini che si spartiscono il resto. Dentro queste ultime, poi, evapora il mito della classe media, ormai diventata mediocre e quasi irredimibile. Le ipotesi sul crollo delle sue aspettative di reddito e benessere sono numerose. Non altrettante le plausibili soluzioni, politiche e non. Mancano, soprattutto, i solutori: quelli più che abili.
May 24, 2019
Although I liked this book there was no encouragement to keep reading. (I knew this before reading) It mostly talked about the inequality in economy and what built up to it, as well as what we could do do fix it. I gave this book three stars because I actually learned a good amount of things and what is going on right now with economy.
May 19, 2025
Noah draws on a fair amount of economic data and papers to make his argument, which I appreciated. As other people mentioned, I thought the last chapter could have been fleshed out more. Noah hints at some of the broader implications of rising income inequality, such as political polarization, which are undoubtedly important but which probably require a more thorough examination.
May 28, 2020
In interesting book about the cause of the ever widening gap between the rich and poor in the United States. There are different causes, but don't blame immigration. If you make less than than $100,000 a year and would like your wages to rise, vote Democrat.
October 9, 2024
Very interesting read about the growth of inequality.
I thought there were some points missed on education and some other issues, but the points that were covered were covered pretty well, and there is a lot to think about.
I thought there were some points missed on education and some other issues, but the points that were covered were covered pretty well, and there is a lot to think about.
January 6, 2018
Super accessible explanations
March 7, 2019
PLS 301: Poverty, Inequality, and U.S. Public Policy
I could have just read the last chapter to find solutions to the problem, but knowing the historical background is relevant.
I could have just read the last chapter to find solutions to the problem, but knowing the historical background is relevant.
May 2, 2021
Dated but very topical today for different reasons than those of 2113.
September 19, 2013
This is a great book that stands out in a saturated market of similar books. Over the years, I’ve read about 70 economic books with near 20 focusing on recessions. With little exception, they all come to the same conclusions regarding our current economic condition. The Great Divergence focuses solely on the growing spread between the top income earners and us. This is, of course, the cause of this and many other economic malaises throughout history.
While many of the other books on the subject do a fine job delving into the issue, I believe that this one stands above most others. It’s concise and clearly written at a level many will be able to follow. While the book rehashes the undeniable issues with the conservative economic models that most other books correctly identify, it does offer a balanced approach. As one versed in the topic would expect, the author covers the last thirty years of political decisions and economic shifts that contributed. The obvious answer to why this happened is because it’s profitable. So we focus on the causes here.
As always, the root cause is a small percentage of the population with enough resourses that they can effectively shut down the debate surrounding economic conditions beyond their own. Obviously, they use the ignorance of the masses against themselves. Yes, yes, we all know the obvious crazy talk from the far right wing, and we all know it’s just a smoke screen of a culture war. This is a well establish tactic the rich have employed. But what we miss are the more subtle, behind the scene moves pioneered in the late 1970s and championed by the Reagan administration.
Subtle things like manipulating the tax codes. The leftists out there bemoan that the rich have a historically low marginal tax rate, yet the fail to understand that the effective tax rate that is paid has remained fairly constant. That rate has stayed consistent within a +/- 1%, though it did drop 4% below the average under the Bush tax plan. That isn’t exactly a significant statistic, and the liberal arguments to that point are easily turned against them because of this. Which is exactly what the elitists want, people are not focusing on the actual causes.
One example the author points out that the effective tax rate for corporations has fallen 25% in the last thirty years. When coupled with the reduction in transfer taxes such as the Estate Tax or capital gain rates levied in the rich, it becomes far more obvious where the problems begin. Basically, the top 1% has created an autocracy based on rents… they rarely produce wealth for themselves and maintain their lifestyles with no effort; they simply live off their minimally taxed investments.
This is but one example of our society that the author explores. This is not groundbreaking, many other people have come to the exact conclusion. This book offers a better focus than most, though this is an important subject and one should explore as many perspectives on the topic. If you only have time for one read into the subject though, this would be where I start.
While many of the other books on the subject do a fine job delving into the issue, I believe that this one stands above most others. It’s concise and clearly written at a level many will be able to follow. While the book rehashes the undeniable issues with the conservative economic models that most other books correctly identify, it does offer a balanced approach. As one versed in the topic would expect, the author covers the last thirty years of political decisions and economic shifts that contributed. The obvious answer to why this happened is because it’s profitable. So we focus on the causes here.
As always, the root cause is a small percentage of the population with enough resourses that they can effectively shut down the debate surrounding economic conditions beyond their own. Obviously, they use the ignorance of the masses against themselves. Yes, yes, we all know the obvious crazy talk from the far right wing, and we all know it’s just a smoke screen of a culture war. This is a well establish tactic the rich have employed. But what we miss are the more subtle, behind the scene moves pioneered in the late 1970s and championed by the Reagan administration.
Subtle things like manipulating the tax codes. The leftists out there bemoan that the rich have a historically low marginal tax rate, yet the fail to understand that the effective tax rate that is paid has remained fairly constant. That rate has stayed consistent within a +/- 1%, though it did drop 4% below the average under the Bush tax plan. That isn’t exactly a significant statistic, and the liberal arguments to that point are easily turned against them because of this. Which is exactly what the elitists want, people are not focusing on the actual causes.
One example the author points out that the effective tax rate for corporations has fallen 25% in the last thirty years. When coupled with the reduction in transfer taxes such as the Estate Tax or capital gain rates levied in the rich, it becomes far more obvious where the problems begin. Basically, the top 1% has created an autocracy based on rents… they rarely produce wealth for themselves and maintain their lifestyles with no effort; they simply live off their minimally taxed investments.
This is but one example of our society that the author explores. This is not groundbreaking, many other people have come to the exact conclusion. This book offers a better focus than most, though this is an important subject and one should explore as many perspectives on the topic. If you only have time for one read into the subject though, this would be where I start.
December 5, 2014
As for what it sets out to do -- describe, in well-researched detail, the economic mess that America is in -- it succeeds. We've heard the talking points, and we've seen some details, in bits and pieces, in columns like those of Paul Krugman and Robert Reich. Here, at least, is a resource for anyone who wants to understand, and discuss, the problem in coherent terms.
The picture Mr. Noah describes is alarming enough, in his telling. Inequality in wealth has revived since its low point in Eisenhower's time, certainly inequality took off in Reagan's. Inequality in _income_ is even more unequal, and more alarming, as he shows. Demographic data -- shifts in family and ethnicity -- is one factor, but just one. The cost of a college education rises rapidly, is debt-ridden rapidly, at a time when it's the new minimum for skilled labor and a middle-class existence. Jobs going offshore is part of it, but not all. Government tax reform since Reagan was part of it, but shifts in government regulation and social policy, much more so. The fall in labor-union power and membership, and the rise in the uppermost weathy, is part of it, but Europe had the same global-market shocks but much less union decline and less visible-wealth rise.
In this light, the "why it matters" chapter may seem just a series of rebuttals to the conventional wisdom, and I can see how it might have disappointed other reviewers. Reading this chapter, the reader needs to remember all the material that went before. Yes, we understand: inequality is not good; income disparity does matter -- a lot -- and creates, yes, unhappiness; the quality of life is not improving even though productivity has; and deny it as you will, inequality is on the rise. He should have stated this in this summary perhaps with more emphasis, because the final "what to do" chapter is radical. Tax the rich; increase the gov't payroll; issue more H-1B permits for foreign skills; universalize preschool and contain college costs; bring back financial regulation; encourage labor unions; and (perhaps too flippantly stated) elect Democratic presidents. (Although I should note that Obama just signed (4/2012) new legislation -- his "JOBS" act -- loosening investment regulations even further).
Still, it's handy to have this book and its data. The national discussion has been way too simplistic and this at least groups the complexities in well-sorted ways.
Strongly recommend this book -- but let it help you draw your own conclusions.
The picture Mr. Noah describes is alarming enough, in his telling. Inequality in wealth has revived since its low point in Eisenhower's time, certainly inequality took off in Reagan's. Inequality in _income_ is even more unequal, and more alarming, as he shows. Demographic data -- shifts in family and ethnicity -- is one factor, but just one. The cost of a college education rises rapidly, is debt-ridden rapidly, at a time when it's the new minimum for skilled labor and a middle-class existence. Jobs going offshore is part of it, but not all. Government tax reform since Reagan was part of it, but shifts in government regulation and social policy, much more so. The fall in labor-union power and membership, and the rise in the uppermost weathy, is part of it, but Europe had the same global-market shocks but much less union decline and less visible-wealth rise.
In this light, the "why it matters" chapter may seem just a series of rebuttals to the conventional wisdom, and I can see how it might have disappointed other reviewers. Reading this chapter, the reader needs to remember all the material that went before. Yes, we understand: inequality is not good; income disparity does matter -- a lot -- and creates, yes, unhappiness; the quality of life is not improving even though productivity has; and deny it as you will, inequality is on the rise. He should have stated this in this summary perhaps with more emphasis, because the final "what to do" chapter is radical. Tax the rich; increase the gov't payroll; issue more H-1B permits for foreign skills; universalize preschool and contain college costs; bring back financial regulation; encourage labor unions; and (perhaps too flippantly stated) elect Democratic presidents. (Although I should note that Obama just signed (4/2012) new legislation -- his "JOBS" act -- loosening investment regulations even further).
Still, it's handy to have this book and its data. The national discussion has been way too simplistic and this at least groups the complexities in well-sorted ways.
Strongly recommend this book -- but let it help you draw your own conclusions.
February 27, 2013
What makes award winning journalist Timothy Noah's book so noteworthy is how deftly combines economic theory with facts in a readable style that demolishes neo conservatives views that income inequality is at acceptable levels in the United States in 2013. Anyone who has lived as an adult in the state the last 30 can recognize some of the economic and class divide realities that Noah expounds on; the stagnation and decline of middle income wages,the decreasing political influence and inability to collectively bargain in private and public sectors of unions, the coalescence of lobbying power by big corporations on the legislative agenda of Congress and the presidency, and the devasting impact of "too big to fail banks" and lax regulation of the banking industry on housing, credit card rules, and bankruptcy law.
Noah well researched scholary look into income inequality debunks ideas that computers, globalization, and poor public school preparation of students for 21st century economies is the reason for the 1% retaining a big slice of the the United States overall economic pie. Why not entirely discounting the above ideas on why income inequality has increased in the United States, Noah brings new facts and other Nobel Prize winning economists arguments to lend academic support to the idea that lobbyists and corporate giants are having an undue influence on Congress, tax laws, and employer to employee relations excaberating the welfare and economic well being of the working and middle classes.
Timothy Noah also gives many reasonable solutions to reverse the American political and economic climate in the 21st century to work for common citizens; create fairer tax laws and eliminate tax loopholes, eliminate the Taft Hartley Act of 1947 to legitimate and spur unionization, nationalize preschool education enrollment for all children, put price controls on higher education to make it affordable to more families and reduce costs, regulate banking institutions to prevent periodic high risk bubbles risky investments like the dot.com and housing bubble by doing away with government bailouts through federal regulation and oversight. Noah's well written and insightful book will fuel futher journalistic and scholarly digging into the now national and political topic of income inequality.
Noah well researched scholary look into income inequality debunks ideas that computers, globalization, and poor public school preparation of students for 21st century economies is the reason for the 1% retaining a big slice of the the United States overall economic pie. Why not entirely discounting the above ideas on why income inequality has increased in the United States, Noah brings new facts and other Nobel Prize winning economists arguments to lend academic support to the idea that lobbyists and corporate giants are having an undue influence on Congress, tax laws, and employer to employee relations excaberating the welfare and economic well being of the working and middle classes.
Timothy Noah also gives many reasonable solutions to reverse the American political and economic climate in the 21st century to work for common citizens; create fairer tax laws and eliminate tax loopholes, eliminate the Taft Hartley Act of 1947 to legitimate and spur unionization, nationalize preschool education enrollment for all children, put price controls on higher education to make it affordable to more families and reduce costs, regulate banking institutions to prevent periodic high risk bubbles risky investments like the dot.com and housing bubble by doing away with government bailouts through federal regulation and oversight. Noah's well written and insightful book will fuel futher journalistic and scholarly digging into the now national and political topic of income inequality.
February 17, 2013
This book is this article expanded into book form.
It was an interesting read, and I did learn some things, like the fact that FDR wanted to institute a maximum wage as well as a minimum wage. But you can get the salient points from the article.
The most important thing I think is missing from his last chapter on how to fix things is the first step, getting the average American to understand how serious the divergence is. Most Americans, when asked, still think the distribution of income is much more equal than it truly is. Most Americans have no idea how limited social and economic upward mobility is. A truly astounding percentage still believe that they'll become rich although you basically have the same odds of winning the lottery. Until you can impress upon people the reality of the situation they'll continue to vote against their own economic best interests. Even people who would benefit from attempts to narrow the divergence in income tend vote against things like an inheritance tax because they think some day they'll be rich and won't want to pay it.
Far too many people believe that if you just work hard you'll get ahead and that the rich don't benefit from government policies. (Ignoring things like corporate welfare or how capital gains are taxed at 15%). I'm not saying that hard work is useless, but there is an abundance of evidence that the gains from productivity increases do not go to workers.
Noah argues that in times past workers saw some benefit because capitalist theory said that workers wouldn't have reason to try hard if they didn't see any positive benefits themselves. He doesn't say that the new view is that workers will work hard whether or not they see direct benefit from gains in productivity because they fear being fired but I think that's what's happening.
I think there also needs to be some incentive for the wealthy to want more income inequality but I don't know what that incentive would be. My theory is that they no longer care if their fellow Americans can buy their products because they can always export them to overseas customers.
It was an interesting read, and I did learn some things, like the fact that FDR wanted to institute a maximum wage as well as a minimum wage. But you can get the salient points from the article.
The most important thing I think is missing from his last chapter on how to fix things is the first step, getting the average American to understand how serious the divergence is. Most Americans, when asked, still think the distribution of income is much more equal than it truly is. Most Americans have no idea how limited social and economic upward mobility is. A truly astounding percentage still believe that they'll become rich although you basically have the same odds of winning the lottery. Until you can impress upon people the reality of the situation they'll continue to vote against their own economic best interests. Even people who would benefit from attempts to narrow the divergence in income tend vote against things like an inheritance tax because they think some day they'll be rich and won't want to pay it.
Far too many people believe that if you just work hard you'll get ahead and that the rich don't benefit from government policies. (Ignoring things like corporate welfare or how capital gains are taxed at 15%). I'm not saying that hard work is useless, but there is an abundance of evidence that the gains from productivity increases do not go to workers.
Noah argues that in times past workers saw some benefit because capitalist theory said that workers wouldn't have reason to try hard if they didn't see any positive benefits themselves. He doesn't say that the new view is that workers will work hard whether or not they see direct benefit from gains in productivity because they fear being fired but I think that's what's happening.
I think there also needs to be some incentive for the wealthy to want more income inequality but I don't know what that incentive would be. My theory is that they no longer care if their fellow Americans can buy their products because they can always export them to overseas customers.
October 12, 2012
This is perhaps the best book around on the set of issues associated with "income inequality" that has come to play a large role in political and economic discussions in the past few years. This is a topic that has more than a few times prompted great disagreements. It is also complex and involves large amount of data and various statistics from that data that are used to make argumentative points. The topic is also complex because it involves lots of subtopics, including: 1) the plight of the poor; 2) the erosion of the middle class; 3) the outsourcing of semi-skilled positions overseas; 4) the growth in the premium from higher education (and the cost of that education); 5) the rise of the very wealthy (top tenth of one percent); 6) the role of immigration in creating income inequality; 7) the role of government in creating and sustaining income inequality . . . Get the idea? Noah systematically works through these topics to present the issues as well as show what is known about each. He is up to date on his research and skillful in explaining it so that you don't need econometrics classes to get the point. (The references are provided for anyone who wishes to look through the actual studies.)
All this, provided with some effective writing, would make the book commendable. Noah ends his work especially effectively by providing a chapter on different theories regarding what the research results on inequality mean as well as a chapter on some policy steps that could be taken. I like the separating out of rationales because it helps the reader to separate the "is" from the "ought" and thus facilitates a better discussion. The policy chapter comes across as thin, but these are hard problems and it would be a problem if he tried to "solve" these problems. I also appreciate that the author is not shy about his own biases, but still goes to great effort to separate out representations of research from rationales attempting to feed research results through personal biases.
I don't expect authors to be value-free. I just appreciate truth in advertising regarding what an author's values and biases are.
All this, provided with some effective writing, would make the book commendable. Noah ends his work especially effectively by providing a chapter on different theories regarding what the research results on inequality mean as well as a chapter on some policy steps that could be taken. I like the separating out of rationales because it helps the reader to separate the "is" from the "ought" and thus facilitates a better discussion. The policy chapter comes across as thin, but these are hard problems and it would be a problem if he tried to "solve" these problems. I also appreciate that the author is not shy about his own biases, but still goes to great effort to separate out representations of research from rationales attempting to feed research results through personal biases.
I don't expect authors to be value-free. I just appreciate truth in advertising regarding what an author's values and biases are.
November 20, 2013
In Timothy Noah's book, "The Great Divergence," the dynamics of income inequality is sharply analyzed from the time when income displaced land ownership as the best measurement of wealth in the U.S. to the present. Although I'm a little more than halfway through it, I envision the current runaway share of income by whom he calls, "the filthy rich" as a hot air balloon untethered by ropes that have lost their grip. If I were to illustrate it, the ropes would be labeled: Taft-Hartley Act; the shift toward cheaper consumer goods and easy credit at the behest of higher priced services (like medical care, legal advice, and college tuition); foreign use of automated computer logic combined with the low skill sets of former American industrial workers, cashiers, bank-tellers, appliance repair persons, etc. and demand for college graduates surpassing supply; greater fear of inflation than unemployment; and more powerful merchants & manufacturers associations than consumer advocacy lobbyists in the halls of Congress. I would depict the tremendous lift of the balloon with a yellow flame blasting into it as banking's transition to trading, partnerships to publicly traded corporations, and government deregulation. The blue flame would reserved for the MIT graduates who choose finance over engineering. Recently pundits were saying that if our country would default on its debt, we would be in uncharted territory; but the gargantuan gulf between the top 0.01% (40% of GDP) and the rest of us is greater than any in history- and far greater than any other nation's. This indicates that its course is already heading toward Oz.
August 30, 2012
This book is frightening, because even though we all sort of know income inequality in the U.S. has been getting worse, the reality is even more terrible that I'd suspected. Noah is a journalist, so this book is well-researched, and every claim Noah makes is documented. He discusses exactly what's been happening, as well as the reasons for it and the fact that it doesn't have to be that way.
There are separate chapters on the "college premium," immigration, the loss of strength of labor unions, and tax cuts for the rich, among others. In each, Noah discusses how things are now against a backdrop of how things used to be in previous decades of our country's history. The differences are instructive.
The final two chapters are "Why it Matters," and "What to do." Many of Noah's recommended "Things to Do" will be difficult to implement (e.g., "soak the rich," reregulate wall street); others are counter-intuitive (e.g., fatten government payrolls, import more skilled labor); still others are things many of us are already convinced we need (e.g., universalize preschool, elect democratic presidents).
Whether you expect to agree with him or not, everyone who plans to vote in the upcoming U.S. elections should read this book immediately.
There are separate chapters on the "college premium," immigration, the loss of strength of labor unions, and tax cuts for the rich, among others. In each, Noah discusses how things are now against a backdrop of how things used to be in previous decades of our country's history. The differences are instructive.
The final two chapters are "Why it Matters," and "What to do." Many of Noah's recommended "Things to Do" will be difficult to implement (e.g., "soak the rich," reregulate wall street); others are counter-intuitive (e.g., fatten government payrolls, import more skilled labor); still others are things many of us are already convinced we need (e.g., universalize preschool, elect democratic presidents).
Whether you expect to agree with him or not, everyone who plans to vote in the upcoming U.S. elections should read this book immediately.
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